Disney CEO Robert Iger extends his contract as search for a successor continues

Disney chief Robert Iger, shown in 2015, has a new deal with the company that lasts until July 2, 2019. (Ricardo DeAratanha / Los Angeles Times)

Walt Disney Co. Chairman and Chief Executive Robert Iger has extended his contract by one year, underscoring the challenges the company's board of directors has faced in finding a successor to lead Hollywood's iconic entertainment giant.

Iger, 66, previously was expected to leave the company at the end of June 2018. His new deal ends July 2, 2019. The extension, Iger's third since he became CEO in 2005, had been widely expected. It gives Disney's board more time to search for a successor — a process that has been closely watched by investors who've expressed concern over the apparent lack of progress on the issue.

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With few obvious internal candidates, the board seems increasingly likely to look outside Disney for its next CEO. Replacing Iger will not be a simple task: the company has enjoyed an extended run of success under Iger, and seen its stock price more than quadruple on his watch.

In an appearance just hours after the contract news was announced Thursday, Iger said he was "serious this time around" about this being his last extension, and acknowledged the complexities of finding his successor.

"Succession is a complicated thing and we felt, meaning the board and I, [that] we could use more time to not only to spend on succession but to create a better transition so we mutually agreed to add another year," Iger said at the SCALE technology and entertainment conference, which was hosted by the USC Marshall and Annenberg schools. He was interviewed by his wife, Willow Bay, the incoming dean of the USC Annenberg School for Communication and Journalism.

Wall Street did not react strongly to Iger's new pact — shares of Disney rose 16 cents to $112.24 — possibly because the extension was considered a fait accompli among investors. But analysts were nevertheless happy about the decision.

"Investors will be pretty pleased with this," said analyst Robin Diedrich of Edward Jones Research. "Shareholders — and we — would agree that he is doing a pretty good job, so it is nice to see that this is confirmed that he will stay on."

Disney has been transformed by three multibillion-dollar acquisitions orchestrated by Iger: Pixar Animation Studios in 2006, Marvel Entertainment in 2009 and Lucasfilm in 2012. Those deals have provided the company with lucrative franchises such as "Star Wars" and "The Avengers," which have been pumped through its diverse array of businesses. Burbank-based Disney's stock is up nearly 8% this year.

Until February, Iger had been firm in saying he would leave Disney when his contract expired in 2018. But during a conference call with analysts last month hesaid that he was "open" to extending his deal — if the board deemed that the best course of action. Disney has no mandatory retirement age for the CEO role, though board members have to retire after they turn 74.

"It is obvious that the company and its shareholders will be best served by [Iger's] continued leadership as the board conducts the robust process of identifying a successor and ensuring a smooth transition," Orin C. Smith, independent lead director of the board, said in a statement.

Replacing Iger will be tough in part because of the job description. Disney has a unique culture and far-flung businesses — including superhero movies and cruise ships — that any future CEO would have to fully grasp.

The company's next leader would inherit a largely different set of challenges from those Iger has tackled. In particular, major changes are afoot in the television industry.

Disney's cable television business has been hurt by cord-cutting and the slimmed-down TV packages offered by service providers.

"You probably need someone who is more new-media oriented, so it probably needs to be somebody outside the company," Michael Alpert, portfolio manager at Stralem & Co., which owns 269,000 shares of Disney, said this month.

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"It's not just the cable business, theme parks business anymore," he said. "Somebody has to have a grip on that."

Disney's board has said very little publicly about its effort to find a replacement for Iger. When Staggs' departure was announced last year, the board said in a statement that it would "broaden the scope of its succession planning process to identify and evaluate a robust slate of candidates for consideration."

With Staggs now gone, Diedrich said "the alternatives at this point are not clear." She noted that "investors are not comfortable with uncertainty" — although it appears unavoidable in this situation.

"It does seem that with the change from Staggs ... that maybe there is more of an appetite for an external candidate," Diedrich said. "But I wouldn't rule out an internal candidate either."

Even before Staggs' departure, succession planning at Disney has been rocky at times. The company endured a protracted handoff from former CEO Michael Eisner to Iger in 2005.

Under terms of his contract extension, Iger's compensation will be determined using the same formulation as before. In fiscal 2016, Iger's total compensation was $43.9 million. His new pact calls for him to receive a $5-million bonus if he remains CEO until July 2019.

As part of the extension, Iger will remain as a consultant to Disney for three years after his CEO term ends. During the consulting period, he will receive $2 million for each of the first two years, and $1 million in the final year.